State affordable-housing incentive program under fire on Maui

Maui County is flirting with imposing its own rules on a state affordable-housing program in an effort that aims to boost, but might depress, lower-priced home production.

The Maui County Council recently endorsed a bill that would stiffen a chief requirement for developers on Maui to use a state program that offers exemptions on permit fees, taxes, zoning limits and other things for projects where at least half the homes meet affordable-pricing guidelines.

Bill 10 passed an initial review last month in a 5-3 vote, and a final vote scheduled for Friday got deferred in favor of holding a public hearing to receive more input on the contentious measure.

A majority of the nine Council members appear to favor the bill, which has received much community support.

However, Bill 10 also has attracted considerable opposition from real estate and construction industry professionals who predict that Maui will see fewer affordable-housing projects if the proposed rules take effect because developers will avoid Maui, Molokai and Lanai in favor of islands where the state incentive program is more attractive.

Councilman Michael Molina proposed the bill early last year on grounds that developers are receiving too many benefits under the state’s so-called 201H program — including general excise tax breaks, permit fee waivers, density bonuses and expedited permitting — for typically meeting the minimum requirement to make just over 50% of homes in a project affordable to households with incomes between somewhat below and above the median.

Bill 10 would increase the minimum to 75%.

“I believe the 50% requirement is not enough,” Molina said in a statement in April. “If developers want to take advantage of the accelerated permit process, the benefit to the community should result in a significantly greater number of affordable housing units.”

Molina said the bill’s goal is to increase affordable-­housing production in the midst of a housing crisis on Maui, where the median sale price for new and previously owned homes last year hit records of $795,575 for single-family houses and $570,000 for condominiums.

Under the 201H process, developers can seek benefits first considered by the Hawaii Housing Finance and Development Corp., a state agency that helps developers produce affordable housing. If HHFDC decides a project merits 201H status, final approval resides with County Councils.

A concerted effort to undermine Bill 10 on grounds that it will lead to fewer affordable-housing projects on Maui has come largely from construction and real estate industry representatives, including the Hawaii Carpenters Union and the Realtors Association of Maui as well as from individual contractors and real estate agents.

“Making the threshold to build (201H projects) on Maui more difficult will not result in more housing even if you say it will,” Jason Economou, Realtors Association of Maui government affairs director, told the Council at a February meeting on the bill. “You’re going to get less housing.”

Bill opponents say developers of 201H projects that don’t receive government financing need a balanced mix of market-price units to subsidize affordable units.

HHFDC said Friday in a letter to the Council that it is concerned the proposed change will reduce affordable-housing development in Maui County.

“We believe that affordable mandates should be balanced with adequate incentives to offset costs (or losses) to make projects financially feasible,” Denise Iseri-Matsubara, HHFDC executive director, said in the letter. “Financial feasibility is the key for affordable housing to be produced by the private sector since there simply is not enough government subsidy to build all the units that are needed.”

Maui Plumbing Inc. owner Raymond Michaels told the Council that the proposed change would hurt affordable-housing production and that more incentives as opposed to disincentives should be put forth.

Sherri Dodson, executive director of the nonprofit low-income housing producer Habitat for Humanity Maui, also said Bill 10 will result in the opposite of what it aims to achieve.

“You will scare off developers,” she said.

Some community members urged the Council not to buy industry arguments.

“I say if they (industry representatives) don’t like it, then you’re probably doing the right thing — so carry on,” community activist Kai Nishiki said at the February meeting.

Another Maui resident suggested that developers will keep building 201H projects on the Valley Isle but just not make as much money.

Karen Comcowich, who also lives on Maui, commended Molina and said the trade-off to produce market-price housing in return for a roughly equal number of affordable homes isn’t worth it.

“The community does not need any more housing that is not affordable for the residents,” she testified last month.

At a March 5 meeting, Molina encouraged his colleagues to “shake the proverbial trees” in an effort to help existing and future generations of many longtime residents afford homes.

“I think sometimes we need to take the bold steps like this and not be afraid,” he said. “We need to take the side of the people who need houses. I appreciate the developer’s perspective, but at some point we got to take the side of the people who are crying for houses right now.”

Molina reiterated that his intention is to create more affordable housing opportunities and not to make it difficult to develop housing or take away incentives.

According to the Maui Department of Housing and Human Concerns, developers have pursued 14 201H projects on Maui, Molokai and Lanai. Of these, four are complete, three are under construction and seven are pending.

Ten of the 14 projects are 100% affordable while four are 50% to 60% affordable. In all, 1,630 of 1,912 units, or 85%, are affordable.

Typically, 100% affordable 201H projects obtain government financing that can include tax credits, bonds, low-interest loans and grants.

Stanford Carr, a local developer who is building one of the 50% affordable projects on Maui, Kahoma Village, said during a recent Grassroot Institute of Hawaii forum that he told Molina last year that developers won’t be able to obtain financing to build such projects if the bill is enacted.

Councilwoman Kelly Takaya King said at the March 5 meeting that she supports the bill despite so much conflicting testimony.

“It’s interesting hearing ‘We need affordable housing, we can’t pass this bill. We need affordable housing, we have to pass this bill.’ But I think the intent of the 75% (requirement) is to continue getting what we’ve been getting,” she said. “We’ve been getting a lot of 100% affordable projects. So we know it’s doable. … We’re saying that we want more of this, we want to focus on this. If we’re going to have housing construction, let’s have it be affordable housing.”